05 Mar 2025

Indian Markets Set for Cautious Start Amid Global Trade Uncertainty

Indian equity markets are expected to open cautiously on Wednesday, as traders react to global trade developments. Concerns arise after the US imposed 25% tariffs on Mexico and Canada, along with an additional 10% tariff on China. However, US Commerce Secretary Howard Lutnick indicated that President Donald Trump may soon announce tariff compromise deals with Canada and Mexico. Additionally, falling crude oil prices due to major producers increasing output in April may provide some support to the markets. Investors will also keep an eye on the Services PMI data, which is due later in the day.

Key Market Factors to Watch:

  • Government's Pro-Business Measures: Finance Minister Nirmala Sitharaman reaffirmed the government's commitment to easing regulatory burdens, fostering trust-based governance, and making India an export-friendly economy.

  • Non-Tariff Barriers Affecting Indian Exports: Director General of Foreign Trade (DGFT) Santosh Kumar Sarangi highlighted that new non-tariff measures, such as the European Union’s carbon tax and deforestation regulations, are restricting market access for Indian goods.

  • Call for a Modern Regulatory Framework: Chief Economic Advisor V Anantha Nageswaran emphasized the need for a modern and responsive regulatory framework to attract foreign direct investment (FDI) and support economic growth.

  • India-US Trade Deal Delayed: The US-India Business Council (USIBC) urged for swift action to remove non-tariff barriers and red tape, as Commerce Minister Piyush Goyal and US counterpart Howard Lutnick resumed trade negotiations. A long-awaited trade deal is expected to benefit both economies.

  • Power Sector in Focus: With peak power demand expected to reach 270 GW this summer, Central Electricity Authority (CEA) Chairman Ghanshyam Prasad stated that India is taking measures such as mandating 17 GW imported coal plants to run at full capacity till April and advising hydro projects to conserve water.

Global Market Overview:

  • US Markets Decline: On Tuesday, US markets closed lower, with the Nasdaq nearing correction territory amid escalating trade tensions following Trump's new tariffs on Canada, Mexico, and China.

  • Asian Markets Gain: Asian markets are trading higher on Wednesday, buoyed by comments from US Commerce Secretary Lutnick suggesting potential tariff rollbacks.

Domestic Market Performance:

Indian equity benchmarks pared early losses but closed slightly lower on Tuesday due to weak global cues, trade war concerns, and persistent foreign institutional investor (FII) selling. The BSE Sensex fell 96.01 points (0.13%) to 72,989.93, while the Nifty dropped 36.65 points (0.17%) to 22,082.65.

Key Market Trends:

  • FIIs Continue Selling: Foreign Institutional Investors (FIIs) were net sellers, offloading equities worth RS 4,788.29 crore in the capital markets on Monday.

  • FDI Declines in Q3: Foreign direct investment (FDI) in India fell by 5.6% year-on-year to $10.9 billion in the October-December quarter due to global economic uncertainties, according to DPIIT data.

  • Indian Banks Show Strong Performance: Fitch Ratings reported that Indian banks exhibited strong performance in the first nine months of FY25, with the impaired loan ratio nearing its lowest level. The agency expects further improvement in FY26.